Agency and Fiduciary Duties: A Comprehensive Guide for Law Students

Question 1

Which of the following is NOT a necessary characteristic of an agency relationship?

Accepted Answer

The creation of the relationship solely through a written contract

Answer

Voluntary consent of all parties involved

Answer

A fiduciary duty owed by the agent to the principal

Answer

The right of the principal to control the agent's conduct

Question 2

An officer of a corporation owes fiduciary duties to:

Accepted Answer

Act in the best interests of the corporation and its shareholders

Answer

Maximize their personal financial gain

Answer

Follow the directives of the majority shareholders, even if it conflicts with the corporation's interests

Answer

Avoid any potential conflicts of interest

Question 3

A person who acts on behalf of a disclosed principal without proper authorization is known as a(n):

Accepted Answer

Unauthorized agent

Answer

Agent

Answer

Employee

Answer

Independent contractor

Question 4

Which of the following is NOT a method by which an agency relationship can be terminated?

Accepted Answer

Unilateral revocation of authority by the principal, even if it causes harm to the agent

Answer

Completion of the purpose for which the agency was created

Answer

Mutual agreement of the principal and the agent

Answer

Incapacity or death of the agent

Question 5

Which of the following is NOT a fiduciary duty owed by corporate officers and directors?

Accepted Answer

Duty of confidentiality

Answer

Duty of care

Answer

Duty of loyalty

Question 6

What is the distinction between express and implied agency?

Accepted Answer

Express agency is created by a written agreement, while implied agency is inferred from the conduct of the parties

Answer

Implied agency is created by a written agreement, while express agency is inferred from the conduct of the parties

Answer

Express agency is created by an oral agreement, while implied agency is inferred from the conduct of the parties

Answer

There is no distinction between express and implied agency

Question 7

What is the legal doctrine of ratification in the context of agency?

Accepted Answer

The acceptance by a principal of an unauthorized act or contract made by an agent

Answer

The rejection by a principal of an unauthorized act or contract made by an agent

Answer

The termination of an agency relationship by the mutual agreement of the parties

Answer

The creation of an agency relationship by the unilateral action of the agent

Question 8

What is the primary distinction between a fiduciary duty and a duty of care?

Accepted Answer

Fiduciary duties are broader and impose a higher standard of care than duties of care

Answer

Duties of care are broader and impose a higher standard of care than fiduciary duties

Answer

Fiduciary duties and duties of care are synonymous

Answer

There is no distinction between fiduciary duties and duties of care

Question 9

In agency relationships, which ethical consideration is paramount?

Accepted Answer

Maintaining the principal's confidentiality

Answer

Prioritizing the agent's personal interests over the principal's

Answer

Engaging in self-dealing transactions without disclosing the conflict of interest

Question 10

Which of the following is NOT a fiduciary duty owed by corporate directors?

Accepted Answer

Duty of obedience

Answer

Duty of care

Answer

Duty of loyalty

Answer

Duty of good faith

Question 11

In the context of agency law, the legal relationship created when one party authorizes another to act on their behalf is known as:

Accepted Answer

Agency

Answer

Partnership

Answer

Joint venture

Answer

Trust

Question 12

Which of the following is NOT a duty of loyalty owed by controlling shareholders?

Accepted Answer

Duty to guarantee shareholder profits

Answer

Duty to avoid self-dealing

Answer

Duty to disclose material information

Answer

Duty to act fairly towards minority shareholders

Question 13

Which of the following is NOT a fiduciary duty owed by officers and directors to the corporation?

Accepted Answer

Duty to maximize profits

Answer

Duty of care

Answer

Duty of loyalty

Answer

Duty to act in good faith

Question 14

An officer of a corporation has a conflict of interest when:

Accepted Answer

They have a personal financial interest in a transaction involving the corporation

Answer

They are friends with the CEO of the corporation

Answer

They are related to a shareholder of the corporation

Answer

They are not a shareholder of the corporation

Question 15

Which of the following is NOT a remedy for a breach of fiduciary duty?

Accepted Answer

Promotion

Answer

Rescission of the transaction

Answer

Damages

Answer

Injunction

Question 16

The business judgment rule provides a defense to officers and directors for:

Accepted Answer

Decisions made in good faith and with reasonable care

Answer

Decisions that violate the law

Answer

Decisions that result in losses for the corporation

Answer

Decisions that benefit the officers and directors personally

Question 17

Which of the following is NOT a factor considered in determining the standard of care for officers and directors?

Accepted Answer

The desires of the shareholders

Answer

The size and complexity of the corporation

Answer

The experience and expertise of the officers and directors

Answer

The industry standards

Question 18

The duty of care requires officers and directors to:

Accepted Answer

Exercise reasonable care and diligence in making decisions

Answer

Follow the advice of outside experts

Answer

Guarantee the success of the corporation

Answer

Avoid all risks

Question 19

Which of the following is NOT a potential consequence of a breach of fiduciary duty?

Accepted Answer

Promotion

Answer

Personal liability

Answer

Injunction

Answer

Removal from office

Question 20

Which of the following is NOT a fiduciary duty owed by officers, directors, and controlling shareholders?

Accepted Answer

Duty of obedience

Answer

Duty of care

Answer

Duty of loyalty

Answer

Duty of confidentiality

Question 21

The concept of agency law applied to business associations refers to:

Accepted Answer

The fiduciary duties owed by officers, directors, and controlling shareholders

Answer

The relationship between a principal and an agent

Answer

The legal capacity of corporations

Answer

The liability of shareholders for corporate debts

Question 22

What is the primary civil remedy for a breach of fiduciary duty?

Accepted Answer

Monetary damages

Answer

Injunction

Answer

Rescission

Answer

Restitution

Question 23

An agent's duty to a principal does NOT include:

Accepted Answer

Profit accounting

Answer

Obedience to instructions

Answer

Loyalty and confidentiality

Answer

Disclosure of potential conflicts of interest

Question 24

An undisclosed principal is legally:

Accepted Answer

Personally liable on contracts made by the agent

Answer

Not liable on contracts made by the agent

Answer

Liable only on contracts that are later ratified

Answer

Partially liable on contracts made by the agent

Question 25

Which of the following is NOT a defining characteristic of fiduciary duties?

Accepted Answer

Objectivity

Answer

Loyalty

Answer

Prudence

Answer

Good faith

Question 26

In agency law, a breach of the agent's duty of obedience occurs when the agent:

Accepted Answer

Fails to follow the principal's instructions

Answer

Acts within the scope of authority

Answer

Avoids conflicts of interest

Answer

Discloses material information

Question 27

Which of the following is NOT a type of fiduciary duty owed by a director of a corporation?

Accepted Answer

Duty of obedience

Answer

Duty of care

Answer

Duty of disclosure

Answer

Duty of loyalty

Question 28

In the case of a breach of fiduciary duty by a corporate director, which of the following entities may bring a derivative action on behalf of the corporation?

Accepted Answer

Shareholders

Answer

Employees

Answer

Customers

Answer

Creditors

Question 29

Which of the following is NOT a fiduciary duty owed by corporate officers and directors?

Accepted Answer

Duty to maximize profits

Answer

Duty of loyalty

Answer

Duty of obedience

Answer

Duty of care

Question 30

In which of the following situations would a controlling shareholder likely breach their duty of loyalty?

Accepted Answer

Purchasing company assets for personal gain

Answer

Exercising their voting rights to elect a board of directors

Answer

Receiving a reasonable compensation package for their services

Answer

Voting in favor of a merger that benefits all shareholders

Question 31

The business judgment rule is a defense that can be asserted by corporate officers and directors when sued for:

Accepted Answer

Breach of fiduciary duty

Answer

Breach of contract

Answer

Negligence

Answer

Fraud

Question 32

Which of the following factors is NOT considered when evaluating whether a corporate officer or director acted in good faith under the business judgment rule?

Accepted Answer

The officer's or director's financial gain

Answer

The officer's or director's reliance on expert advice

Answer

The officer's or director's compliance with corporate policies

Answer

The officer's or director's independent investigation

Question 33

The duty of disclosure requires corporate officers and directors to:

Accepted Answer

Disclose all material information that could affect shareholder decisions

Answer

Keep all company information confidential unless legally required to disclose

Answer

Disclose only information that is required by law

Question 34

Which of the following is NOT a fiduciary duty owed by corporate officers and directors?

Accepted Answer

Duty to maximize immediate stock price

Answer

Duty of good faith

Answer

Duty of care

Answer

Duty of loyalty

Question 35

In a conflict of interest situation, what action should a corporate officer or director take?

Accepted Answer

Fully disclose the conflict and abstain from voting on the matter

Answer

Resign from their position

Answer

Vote in favor of the decision that personally benefits them

Question 36

Potential remedies for a breach of fiduciary duty by a corporate officer or director include:

Accepted Answer

Rescission of contracts, compensatory damages, and injunctions

Answer

Criminal penalties only

Answer

Termination of employment only

Question 37

The business judgment rule protects corporate officers and directors from liability for:

Accepted Answer

Decisions made in good faith and with reasonable care

Answer

Gross negligence or willful misconduct

Answer

Any breach of fiduciary duty

Question 38

Which of the following is NOT a factor considered in determining a breach of the duty of care?

Accepted Answer

Personal financial circumstances of the officer or director

Answer

Experience and expertise of the officer or director

Answer

Industry standards

Question 39

The duty of loyalty requires corporate officers and directors to:

Accepted Answer

Act in the best interests of the corporation and its shareholders

Answer

Maximize their personal gain

Answer

Follow the instructions of the majority shareholder

Question 40

The duty of good faith requires corporate officers and directors to:

Accepted Answer

Act honestly and ethically in the best interests of the corporation

Answer

Avoid any perception of impropriety

Answer

Prioritize creditor interests over shareholder interests

Question 41

Piercing the corporate veil is a legal doctrine used to:

Accepted Answer

Hold individual shareholders or officers personally liable for the corporation's debts.

Answer

Impose criminal penalties on corporate officers and directors.

Answer

Protect the corporation from liability for the actions of its shareholders.

Question 42

Which of the following is NOT a fiduciary duty owed by officers and directors to a corporation?

Accepted Answer

Duty to maximize profits.

Answer

Duty of loyalty.

Answer

Duty of care.

Answer

Duty of confidentiality.

Question 43

In agency law, a 'controlling shareholder' is defined as someone who:

Accepted Answer

Owns or controls more than 50% of the company's voting shares.

Answer

Has been appointed by the board as an officer.

Answer

Is a member of the board of directors.

Question 44

Which of the following is NOT a characteristic of a valid agency relationship?

Accepted Answer

Lack of capacity by the principal.

Answer

Consent by both the principal and the agent.

Answer

Mutual consideration.

Answer

Legal purpose.

Question 45

The doctrine of 'respondeat superior' states that:

Accepted Answer

An employer is liable for wrongful acts committed by its employees within the scope of their employment.

Answer

An employee is liable for wrongful acts committed by their employer.

Question 46

Which duty do officers and directors NOT owe to a corporation?

Accepted Answer

Duty to Maximize Profits

Answer

Duty of Loyalty

Answer

Duty of Good Faith

Answer

Duty of Care

Question 47

What is the primary purpose of the business judgment rule?

Accepted Answer

To protect directors from liability for decisions made in good faith

Answer

To guarantee corporate profitability for shareholders

Answer

To require shareholder review of all corporate decisions

Answer

To impose a higher standard of care on directors

Question 48

What is the primary legal remedy for a breach of fiduciary duty?

Accepted Answer

Equitable relief, such as an injunction or accounting

Answer

Monetary damages

Answer

Criminal prosecution

Answer

Dissolution of the corporation

Question 49

In a claim of breach of fiduciary duty of care, who has the burden of proof?

Accepted Answer

The plaintiff

Answer

The shareholders

Answer

The court

Answer

The defendant

Question 50

What is a common defense against a claim of breach of fiduciary duty of loyalty?

Accepted Answer

The director acted in good faith, as per the business judgment rule.

Answer

The plaintiff's lack of standing

Answer

The doctrine of estoppel

Answer

The statute of limitations

Question 51

What key difference distinguishes an agent from a fiduciary?

Accepted Answer

A fiduciary owes a higher level of duty and trust

Answer

Agents and fiduciaries are legally identical

Answer

A fiduciary has no legal obligation to the principal

Answer

An agent always acts on behalf of a principal

Question 52

Which factor is NOT considered by courts when determining a fiduciary relationship?

Accepted Answer

The presence of a written agreement

Answer

The level of trust and confidence between parties

Answer

The purpose of the relationship

Answer

The degree of control one party has over another

Question 53

What is the main purpose of a shareholder derivative suit?

Accepted Answer

To allow shareholders to sue on behalf of the corporation

Answer

To provide a direct remedy to individual shareholders

Answer

To force a company to be acquired by another

Answer

To criminally prosecute corporate officers for misconduct