1. What type of authority allows an agent to perform acts that are reasonably necessary to accomplish the agent’s duties?
a) Actual authority
b) Apparent authority
c) Implied authority
d) Express authority
Answer: c) Implied authority
2. Which of the following is true about “apparent authority”?
a) It is the authority that an agent believes they have
b) It is based on the principal’s representations to third parties
c) It must be expressly communicated by the principal
d) It is the authority given to the agent in writing
Answer: b) It is based on the principal’s representations to third parties
3. If an agent acts beyond their authority and the principal does not ratify the actions, who is liable?
a) The principal
b) The agent
c) The third party
d) The court
Answer: b) The agent
4. What is “actual authority” in an agency relationship?
a) Authority inferred from the agent’s actions
b) Authority that the principal explicitly grants to the agent
c) Authority that the agent assumes based on the role
d) Authority granted by third parties
Answer: b) Authority that the principal explicitly grants to the agent
5. Which of the following statements is correct about an agent’s liability for unauthorized acts?
a) The agent is not liable if the principal eventually approves the act
b) The agent is always liable for unauthorized acts, regardless of principal’s approval
c) The principal is liable if the agent acts beyond their authority
d) The agent is liable only if the act was performed with malicious intent
Answer: b) The agent is always liable for unauthorized acts, regardless of principal’s approval
6. Under what condition can a principal be held liable for the acts of an agent?
a) When the agent acts outside their authority
b) When the agent acts within the scope of their authority
c) When the agent’s actions are not related to the principal’s business
d) When the agent’s actions are against the principal’s interest
Answer: b) When the agent acts within the scope of their authority
7. What does “express authority” mean in an agency context?
a) Authority that is given through verbal or written instructions
b) Authority that is implied from the agent’s role
c) Authority granted by a third party
d) Authority that arises from customary practice
Answer: a) Authority that is given through verbal or written instructions
8. What happens if an agent acts with apparent authority but the principal never authorized such authority?
a) The principal is bound by the agent’s actions
b) The agent is not liable for the actions
c) The principal is not bound by the agent’s actions if the agent acted without actual authority
d) The third party is responsible for the agent’s actions
Answer: c) The principal is not bound by the agent’s actions if the agent acted without actual authority
9. Which duty requires an agent to avoid conflicts of interest and to act solely in the interest of the principal?
a) Duty of care
b) Duty of loyalty
c) Duty of obedience
d) Duty of disclosure
Answer: b) Duty of loyalty
10. If a principal gives an agent broad discretion to act, which type of authority does the agent have?
a) Limited authority
b) Apparent authority
c) Implied authority
d) Specific authority
Answer: c) Implied authority
11. When an agent is authorized to perform certain acts but goes beyond those acts, which type of authority is the agent using?
a) Apparent authority
b) Express authority
c) Implied authority
d) Unauthorized authority
Answer: d) Unauthorized authority
12. If an agent’s act is within the scope of their authority but is done in a way that is contrary to the principal’s instructions, who is liable?
a) The principal
b) The agent
c) Both the principal and the agent
d) The third party
Answer: b) The agent
13. What is “ratification” in terms of agency authority?
a) The agent’s initial authorization to act
b) The principal’s approval of an act performed by the agent without authority
c) The agent’s agreement to follow the principal’s instructions
d) The termination of the agency relationship
Answer: b) The principal’s approval of an act performed by the agent without authority
14. What is required for a principal to be liable for an agent’s actions?
a) The principal must be aware of the agent’s actions
b) The agent must act within the scope of their authority
c) The agent must act with apparent authority
d) The principal must have directly authorized the agent’s actions
Answer: b) The agent must act within the scope of their authority
15. If an agent acts with actual authority and causes harm, who is liable for damages?
a) The principal
b) The agent
c) The third party
d) Both the principal and the agent
Answer: a) The principal