MCQs on Agency Law
- Which of the following is the most accurate definition of an agency relationship?
- A. A relationship where one party owes another a duty of care.
- B. A relationship where one party acts on behalf of another party.
- C. A relationship where two parties have equal authority.
- D. A relationship where one party is a fiduciary for another.
Answer: B. A relationship where one party acts on behalf of another party.
- Which of the following is NOT a type of authority that an agent can possess?
- A. Actual authority
- B. Apparent authority
- C. Express authority
- D. Ultimate authority
Answer: D. Ultimate authority
- An agent is said to have ‘apparent authority’ when:
- A. The agent has been explicitly given authority by the principal.
- B. The principal’s conduct leads a third party to believe the agent has authority.
- C. The agent acts beyond their actual authority but within the scope of the business.
- D. The principal and agent agree that the agent has authority.
Answer: B. The principal’s conduct leads a third party to believe the agent has authority.
- Which of the following is true about a fiduciary duty in an agency relationship?
- A. It requires the agent to act in the principal’s best interest.
- B. It requires the principal to act in the agent’s best interest.
- C. It does not include duties of loyalty and care.
- D. It only applies if the agent is receiving payment.
Answer: A. It requires the agent to act in the principal’s best interest.
- In an agency relationship, the agent owes which of the following duties to the principal?
- A. Duty of loyalty
- B. Duty of obedience
- C. Duty of care
- D. All of the above
Answer: D. All of the above
- If an agent acts without authority, the principal can:
- A. Always ratify the agent’s actions.
- B. Never ratify the agent’s actions.
- C. Ratify the agent’s actions, making them binding as if the agent had original authority.
- D. Terminate the agency relationship retroactively.
Answer: C. Ratify the agent’s actions, making them binding as if the agent had original authority.
- A sub-agent is:
- A. An agent appointed by another agent to perform tasks.
- B. An agent directly appointed by the principal.
- C. A third party who acts on behalf of the principal without any formal agreement.
- D. An agent who has limited authority.
Answer: A. An agent appointed by another agent to perform tasks.