Agent Liability: A Comprehensive Guide for Law Students

Question 1

Which of the following is NOT a circumstance under which an agent may be liable to their principal for breach of contract?

Accepted Answer

Acting within their apparent authority

Answer

Breaching their express authority

Answer

Breaching their implied authority

Answer

Committing unauthorized acts

Question 2

In which of the following situations would an agent be liable to their principal for a tort committed within the scope of their authority?

Accepted Answer

When the agent acted negligently

Answer

When the principal ratified the wrongful act

Answer

When the third party suffered damages

Answer

When the agent was acting in good faith

Question 3

In the context of torts, when is an agent liable to third parties for their actions?

Accepted Answer

When the agent acts within the scope of their authority and causes harm to a third party

Answer

When the principal is also liable for the agent's actions

Answer

When the third party suffers damages as a result of the agent's actions

Answer

When the agent acts negligently

Question 4

True or False: An agent's duties to their principal include acting in good faith, exercising reasonable care, and accounting for all funds entrusted to them.

Accepted Answer

True

Answer

False

Question 5

True or False: An agent has a duty to disclose all material facts to their principal, even if the principal does not inquire about them.

Accepted Answer

True

Answer

False

Question 6

What is the significance of ratification in the context of agency liability?

Accepted Answer

It retroactively validates the agent's actions, making them binding on the principal

Answer

It creates a new contract between the principal and the third party

Answer

It relieves the agent of potential liability

Answer

It transfers liability from the principal to the agent

Question 7

Regarding agent liability for breach of contract with a third party, the principal is:

Accepted Answer

Always liable, regardless of whether the agent acted within the scope of their authority.

Answer

Always personally liable, even if the agent acted within the scope of their authority.

Answer

Only liable if the agent exceeded the scope of their authority.

Answer

Never liable, as the agent is solely responsible for their actions.

Question 8

Apparent authority's key element is:

Accepted Answer

The third party's reasonable belief that the agent has authority

Answer

The principal's belief that the agent has authority

Answer

The agent's express representation of authority

Answer

The principal's ratification of the agent's actions

Question 9

Actual authority differs from apparent authority in that:

Accepted Answer

Actual authority is based on the principal's consent, while apparent authority is based on the third party's belief.

Answer

Apparent authority is based on the principal's consent, while actual authority is based on the third party's belief.

Answer

Actual authority and apparent authority are the same concept.

Answer

Actual authority is always broader than apparent authority.

Question 10

A common defense to the principal's liability for an agent's torts is:

Accepted Answer

Contributory negligence of the third party

Answer

Comparative fault of the agent

Answer

Force majeure

Answer

Statute of limitations

Question 11

The legal doctrine that holds an individual personally liable for a business's debts and obligations is:

Accepted Answer

Piercing the corporate veil

Answer

Respondeat superior

Answer

Implied warranty of merchantability

Answer

Ultra vires

Question 12

Identify the action that falls outside the scope of an agent's typical authority:

Accepted Answer

Disposition of company assets without authorization

Answer

Procurement of necessary supplies for the business

Answer

Hiring of additional staff for the company

Question 13

In a situation where an agent commits a tort while operating within the scope of their authority, who bears primary liability towards the injured party?

Accepted Answer

Both the agent and the principal

Answer

Solely the agent

Answer

Solely the principal

Answer

Neither the agent nor the principal

Question 14

Which of the following defenses is NOT typically available to an agent in an action for tort?

Accepted Answer

Statutory immunity

Answer

Contributory negligence

Answer

Assumption of risk

Answer

Statute of limitations

Question 15

When an agent acts without authority but the principal ratifies the agent's actions, the principal is:

Accepted Answer

Bound by the agent's actions

Answer

Not bound by the agent's actions

Answer

Vicariously liable for the agent's actions

Answer

Contributory negligent for the agent's actions

Question 16

Which of the following defenses is NOT available to an agent for torts committed within the scope of their authority?

Accepted Answer

Lack of knowledge of the principal's instructions

Answer

Contributory negligence of the principal

Answer

Assumption of risk by the injured party

Question 17

An agent who acts within the scope of their apparent authority is liable to third parties even if:

Accepted Answer

The principal did not actually authorize the agent's actions.

Answer

False

Question 18

An agent's duty of care requires them to:

Accepted Answer

Exercise the same level of care as a reasonable person in the same circumstances.

Answer

An agent must exercise the highest possible level of care for the principal's interests.

Question 19

In cases where an agent breaches their fiduciary duty to the principal, the principal may be entitled to:

Accepted Answer

Equitable remedies such as an injunction or specific performance.

Answer

False

Question 20

Which of the following is a defense that an agent can assert in a lawsuit brought by a principal for breach of contract?

Accepted Answer

Lack of authority

Answer

Lack of capacity

Answer

Breach of fiduciary duty

Answer

Unclean hands

Question 21

Which of the following is NOT considered when determining whether an agent acted within the scope of their authority?

Accepted Answer

The agent's personal beliefs

Answer

The nature of the agent's duties

Answer

The agent's previous conduct

Answer

The principal's instructions

Question 22

What is the primary purpose of the doctrine of respondeat superior?

Accepted Answer

To hold principals liable for the torts of their agents

Answer

To protect agents from liability for their own torts

Answer

To promote fairness in the allocation of liability

Answer

To deter principals from employing agents who are likely to commit torts

Question 23

True or False: An agent can be held liable to a third party for a tort, even if the principal is not liable.

Accepted Answer

True

Answer

False

Question 24

The legal principle of ratification enables a principal to:

Accepted Answer

Retroactively approve the unauthorized actions of an agent, making them binding on the principal.

Answer

Prevent the creation of an agency relationship altogether.

Answer

Unilaterally terminate an existing agency relationship.

Answer

Assign legal liability to a third party who is not involved in the agency relationship.

Question 25

The legal principle that holds an employer liable for the tortious acts of their employees committed within the scope of their employment is known as:

Accepted Answer

Respondeat superior

Answer

Qui facit per alium facit per se

Answer

Ultra vires

Answer

Implied authority

Question 26

Which of the following is NOT a recognized method for terminating an agency relationship?

Accepted Answer

Bankruptcy of the agent

Answer

Mutual agreement between the principal and agent

Answer

Death or legal incapacity of the principal

Answer

Completion of the specific task or objective for which the agency was created

Question 27

When an agent exceeds their authority, the principal can avoid liability to the third party by:

Accepted Answer

Disaffirming the contract within a reasonable time

Answer

Appointing a new agent

Answer

Paying damages to the third party

Answer

Ratifying the contract

Question 28

An undisclosed principal is:

Accepted Answer

Not revealed to the third party and is liable to the third party, even if the agent acts within their authority.

Answer

Liable to the third party only if the agent is insolvent

Answer

Always liable to the third party

Answer

Not liable to the third party unless the agent exceeds their authority

Question 29

Which of the following is NOT a duty of an agent to their principal?

Accepted Answer

To engage in speculation

Answer

To obey instructions

Answer

To account for all funds received

Answer

To exercise reasonable care and skill

Question 30

An agent who breaches their fiduciary duty to their principal may be liable for:

Accepted Answer

Restitution, damages, disgorgement of profits, or any combination thereof

Answer

Imprisonment

Answer

Punitive damages only

Answer

Loss of agency license

Question 31

What is the "captain of the ship" doctrine?

Accepted Answer

A rule that holds a master of a ship liable for the torts of the crew committed within the scope of their employment.

Answer

A rule that holds a principal liable for the torts of an agent committed outside the scope of their employment.

Question 32

Which of the following statements is true regarding an agent's liability to a principal for breach of fiduciary duty?

Accepted Answer

The agent may be liable for damages and equitable remedies.

Answer

The principal cannot sue the agent for breach of fiduciary duty unless the agent has acted fraudulently.

Answer

The agent is only liable for damages if the principal suffers a loss.

Question 33

What is the difference between an agent's duty of obedience and their duty of loyalty?

Accepted Answer

The duty of obedience requires the agent to follow the principal's instructions, while the duty of loyalty requires the agent to act in the best interests of the principal.

Answer

The duty of obedience is only owed to the principal, while the duty of loyalty is owed to all third parties.

Question 34

What is the "fraud on the principal" exception to the principal's duty to indemnify the agent?

Accepted Answer

The principal is not required to indemnify the agent if the agent has committed fraud against the principal.

Answer

The principal is only required to indemnify the agent if the agent has acted within the scope of their authority.

Question 35

Which of the following is a potential defense to an agent's liability to a third party for a tort committed within the scope of their employment?

Accepted Answer

The agent was acting in self-defense.

Answer

The agent was intoxicated at the time of the tort.

Answer

The principal has ratified the agent's actions.

Answer

The agent was acting under the direct orders of their principal.

Question 36

An agent who commits a tort while acting within the scope of their authority is liable to:

Accepted Answer

The injured third party and the principal

Answer

The principal only

Answer

Neither the injured third party nor the principal

Answer

The injured third party only

Question 37

Which of the following is NOT a factor considered in determining whether an agent was acting within the scope of their authority?

Accepted Answer

The agent's subjective intent

Answer

The nature of the agent's duties

Answer

Industry customs

Answer

The principal's instructions

Question 38

An agent who exceeds their authority may be liable to the principal for:

Accepted Answer

Breach of contract and tort

Answer

Neither breach of contract nor tort

Answer

Breach of contract only

Answer

Tort only

Question 39

A principal may be liable for the fraudulent misrepresentations of their agent even if the principal:

Accepted Answer

Did not authorize the misrepresentations

Answer

Did not benefit from the misrepresentations

Answer

All of the above

Answer

Had no knowledge of the misrepresentations

Question 40

An agent who is held out as having authority to act on behalf of a principal is known as a:

Accepted Answer

Apparent agent

Answer

Subagent

Answer

Actual agent

Question 41

An agent, acting within the scope of their authority, enters into a contract on behalf of their principal. The contract is later found to be voidable due to the principal's misrepresentation. Which of the following statements accurately describes the agent's liability?

Accepted Answer

The agent is generally not liable for the principal's misrepresentation, as long as they acted in good faith and disclosed all material facts.

Answer

The agent is always liable for the principal's misrepresentation, regardless of their own knowledge or actions.

Question 42

A real estate agent, acting on behalf of their client, makes a negligent misstatement about the property's condition to a potential buyer. The buyer relies on this statement and suffers financial losses.  Which of the following is most likely true?

Accepted Answer

Both the agent and the principal may be held liable for the agent's negligence.

Answer

Only the agent is liable for their own negligence.

Answer

Only the principal is liable for the agent's negligence, as they are responsible for their agent's actions.

Question 43

An agent, acting on their principal's behalf, commits a tort that falls outside the scope of their authority. Which of the following statements best describes the principal's liability?

Accepted Answer

The principal is generally not liable for the agent's tort if it was outside the scope of their authority.

Answer

The principal is always liable for their agent's torts, regardless of the scope of their authority.

Question 44

A principal instructs their agent to make a specific purchase, but the agent exceeds the principal's instructions and purchases additional items. The principal is unhappy with the agent's actions. Which of the following is most likely true?

Accepted Answer

The agent may be liable for breach of contract, as they failed to adhere to the principal's instructions.

Answer

The agent is not liable for exceeding their authority, as long as they acted in the best interests of the principal.

Question 45

An agent enters into a contract on behalf of their principal, but fails to disclose their agency relationship to the other party. The other party later discovers the agency relationship and seeks to avoid the contract. Which of the following statements accurately describes the agent's potential liability?

Accepted Answer

The agent may be held personally liable for the contract, as they failed to disclose their agency status.

Answer

The agent is not liable, as the principal is ultimately responsible for the agent's actions.

Question 46

An agent, while acting within the scope of their authority, enters into a contract with a third party on behalf of their principal. The contract contains a provision that exempts the agent from personal liability.  What is the most likely outcome regarding the agent's liability?

Accepted Answer

The agent will likely be protected from personal liability due to the contract provision.

Answer

The agent will still be personally liable, as such provisions are generally unenforceable.

Answer

The agent's liability will depend on whether the principal is solvent and able to fulfill their obligations under the contract.

Question 47

An agent is authorized to purchase inventory for their principal's business. The agent purchases inventory from a supplier with whom the principal has a pre-existing agreement. The agent, however, secretly accepts a bribe from the supplier to inflate the purchase price. Which of the following best describes the agent's liability?

Accepted Answer

The agent is liable to the principal for breach of fiduciary duty and may also be subject to criminal penalties.

Answer

The agent is only liable to the principal for the difference between the actual purchase price and the agreed-upon price.

Question 48

A principal hires an agent to negotiate a business deal. The agent, while negotiating, makes a negligent statement to the other party, leading to a loss for the principal. Which of the following is the most likely outcome regarding the principal's liability?

Accepted Answer

The principal is likely liable for the agent's negligence under the doctrine of respondeat superior.

Answer

The principal is not liable for the agent's negligence, as the agent was acting independently in the negotiations.

Answer

The principal is only liable if they authorized the agent to make the negligent statement.

Question 49

An agent, authorized to purchase goods for their principal, enters into a contract with a third party. The agent falsely represents to the third party that the principal has a higher credit rating than they actually have. The third party, relying on the agent's misrepresentation, suffers financial losses. Which of the following best describes the agent's liability?

Accepted Answer

The agent is liable for fraudulent misrepresentation, as they knowingly made a false statement that induced the third party's reliance.

Answer

The agent is not liable for misrepresentation, as the principal is ultimately responsible for the agent's actions.

Question 50

An agent is hired to manage a principal's property. The agent, without the principal's knowledge, enters into a lease agreement with a tenant for a period exceeding the agent's authority. The principal subsequently discovers the lease agreement and wishes to avoid it.  Which of the following statements accurately describes the agent's liability?

Accepted Answer

The agent may be liable to the principal for breach of contract and exceeding their authority, potentially making the lease agreement voidable.

Answer

The agent is not liable, as they acted in the best interests of the principal by securing a tenant for the property.