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Exam 19: Secured Transactions and Bankruptcy

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Question 21

Multiple Choice

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Which of the following is a form of authority upon which an agency relationship may be based?

A) Expressed agency
B) Implied agency
C) Apparent agency
D) Ratification
E) All of these

F) C) and D)
G) A) and E)

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Question 22

Multiple Choice

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Reference - Cheap Principal. Jason, who is very knowledgeable regarding computers, agrees to purchase computers for Nick's business. Jason is retained for that purpose only, he is paid a set rate for the job, and Nick exercised no control over the manner in which Jason did his work. Jason purchased computers on credit from ABC Computers without any mention of Nick. The computers worked well and were not defective in any way. Unfortunately, Nick did not pay ABC Computers on a timely basis. Jason, therefore, paid ABC Computers out of his own pocket because he wanted to be able to do business with ABC in the future and also because his name was on the invoice. Jason asked Nick for reimbursement, but Nick refused. Nick claimed that if Jason had only waited, ABC Computers might have agreed to take less. Which of the following likely represents Jason's status in regards to his employment with Nick?

A) He was an independent contractor.
B) He was an employee.
C) He had a special status called employee-contractor, a term used to represent a contractor who is neither an employee nor an independent contractor.
D) He was an express contractor.
E) He was an implied contractor.

F) A) and E)
G) A) and C)

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Question 23

Multiple Choice

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Which of the following is false regarding revocation of the authority of an agent and renunciation by an agent?

A ______________ is a written document, created by a principal, expressing his or her wishes for an agent's authority not to be affected by the principal's subsequent incapacity.

Set forth the requirements for a finding of agency by ratification and also the requirements needed for ratification to be effective.

Reference - Nasty Break-Up. Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah. Harold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up. Harold agrees with Alice that Alice will purchase the lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority. Alice tells Sarah nothing about her plan to later transfer the lot to Harold. Before title to the lot is transferred to Alice, Harold tells Alice that he no longer wants the lot. Alice tells Sarah about Harold. Sarah tells Alice that as far as she is concerned, Alice has bought the lot. Sarah says that she plans to move anyway and really does not care whether Alice or Harold end up with the lot. She just wants her money. What type of principal is Harold?

Reference - Roofing Issues. Sally agrees to roof a house for Bob. After doing his research, Bob chooses Sally based on her great reputation for being conscientious and doing good work. Bob knows little about roofing and stays away from all the noise involved. Sally provides her own tools for herself and other workers, sets her own schedule, and charges a flat rate of $10,000 to be paid when the job is completed. Sally hires Trudy, Glen, and Fred to help with the roofing. She pays them an hourly rate, supervises their work, provides them with tools and materials, and sets their schedules. Curious about what is going on there, Bob's friend Spencer walks by the house while the roofing is being done. Glen absent-mindedly throws some old shingles off the roof and hits Spencer in the head resulting in him going to the local emergency room and receiving a couple of stitches in his scalp. Spencer decides to sue all the roofers and also Bob and Sally for his hospital expenses and for pain and suffering. Assuming Glen was negligent, which of the following is the most likely result in a lawsuit against Trudy and Fred brought by Spencer?

Reference - Lakeside Property. Ronnie agreed to act as the agent of Sue in finding a piece of lakeside property for her at a good price and also in obtaining a loan for her with which to purchase the property. She agreed to pay him $500 for doing so. To assist Ronnie in his duties, Sue disclosed to Ronnie confidential information about her finances and debts. Ronnie decided that he needed help and paid Rick $300 to look for property for Sue. Bruce told Ronnie about a great deal on a piece of lakeside property that Bruce had for sale. In fact, the deal was so good that Ronnie purchased the property for himself. When Sue found out about the property Ronnie bought for himself, she complained to Ronnie. He defended himself on the basis that he was not actually working for Sue when he found out about the deal. At the time, he was playing golf with Bruce. He also told Sue that he had hired Rick for $300 to assist him and that he could not be held liable because he had turned the job over to Rick. He asked Sue for reimbursement of that amount. Sue fired Ronnie threatening to sue him. Ronnie told Sue that he would counterclaim for the $300 owed to Rick. Only after he was fired, Ronnie disclosed to a number of parties information regarding Sue's spending habits which he thought were excessive. Which of the following is the most likely result if Sue sues Ronnie for revealing confidential information?

If a manager has business transactions in one of the European Union countries and wants to terminate an agency relationship, he or she would want to have access to knowledge about which of the following?

Agents may have contract remedies available against principals, but not tort remedies.

Reference - Nasty Break-Up. Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah. Harold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up. Harold agrees with Alice that Alice will purchase the lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority. Alice tells Sarah nothing about her plan to later transfer the lot to Harold. Before title to the lot is transferred to Alice, Harold tells Alice that he no longer wants the lot. Alice tells Sarah about Harold. Sarah tells Alice that as far as she is concerned, Alice has bought the lot. Sarah says that she plans to move anyway and really does not care whether Alice or Harold end up with the lot. She just wants her money. Which of the following is true regarding whether Alice is personally bound on the contract with Sarah?

Reference - High Maintenance. Paul, who runs a retail jewelry store, went with Jane, to whom he was engaged to be married, to a wholesale jewelry store. Paul had no express, written agreement with Jane by which she was his agent. In fact, Paul had told Jane not to buy anything at the store. The wholesale jeweler, Pam, asked Paul if Jane was buying for him. Paul did not want to embarrass Jane so he nodded in agreement. A few minutes later Paul reminded Jane, outside the hearing of the wholesaler, that she should not make any purchases. Paul and Jane had a big disagreement over money that evening, and Jane broke off their engagement. The next day Jane went back to the wholesale jeweler and purchased a string of pearls for $2,000. Jane also purchased a fur jacket for $3,000 from a store owned by Harry that was next door to the jewelry store. She told Harry that Paul wanted a fur jacket for a model in his store and that Paul would be glad to pay Harry for the jacket. Which of the following is the most likely result if Harry sues Paul for the price of the jacket?

Which of the following is an agency agreement created for the agent's benefit, not for the principal's?

An agent cannot represent both the principal and a third party in an agreement because there could be a ______________.

An agency relationship can be created only for a lawful purpose.

In an express agency relationship, the agent has ______________ authority.

Which of the following is true if an agent has no actual or apparent authority to act on behalf of a principal, but the agent still enters into a contract with a third party?

Which of the following is the term used to identify the duty of an agent to perform specified duties with reasonable skill and care?

Reference - The Big Sale. Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a planned big summer sale. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Frank told Bob that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has just been fired from his last three jobs for violent actions against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long time employee of Christy who had never caused any problem before, negligently dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie. Which of the following is true regarding whether Greg has any right of recovery against Susie for his injured foot?

Which of the following is true under the UCC regarding liability of a principal to an agent if the agent enters into a contract that is a negotiable instrument?