Notes Business Law

Chapter 24

Question 1

1. An agent’s knowledge is imputed to the principal.

True

Question 2

1. A principal is obligated to pay any judgments against an agent who incurred liability to a third party while carrying out the principal’s orders. This duty to hold the agent “harmless” is the duty to___________.

| d. | Indemnify |

Question 3

1. Jim was called to active duty in the military. Knowing that he would be out of the country for a year or more, he gave his sister Peg authority to pay bills in his name, access his bank accounts, buy and sell stock in his brokerage accounts, and incur expenses to maintain his house and car and boat. Peg is Jim’s______________.

| a. | General agent |

Question 4

1. What is the status of an agency agreement when a principal files for Chapter 7 bankruptcy?

| a. | The agency terminates by operation of law when the court grants the order for relief. |

Question 5

1. An agency will terminate by operation of law if the principal files for Chapter 7 bankruptcy.

True

Question 6

1. A person who is given power of attorney is called a(n)______________.

| d. | Attorney in fact |

Question 7

1. If a third party does not know that he is dealing with an agent and believes that the agent is acting on his own behalf and will perform on the contract, the principal in this situation is ______________.

| c. | Undisclosed |

Question 8

1. A store manager is an example of a general agent.

True

Question 9

1. Mike is a sole proprietor who buys, sells and repairs kilns and other equipment used in pottery making. He has an arrangement with K&M, a large equipment maker, to sell K&M’s kilns in both his own name and in K&M’s name and to receive payments from customers. Mike’s relationship with K&M is that of a ________________.

| b. | Broker |

Question 10

1. Sam is retiring and selling his business to Ed, an employee. They want Larry Lawyer to draw up a sales...