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S05 R-7 Class Questions Previedw - Regulation 7 Class...

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Regulation 7 Class Questions 1 1. CPA-01311 Trent was retained, in writing, to act as Post's agent for the sale of Post's memorabilia collection. Which of the following statements is correct? I. To be an agent, Trent must be at least 21 years of age. II. Post would be liable to Trent if the collection was destroyed before Trent found a purchaser. a. I only. b. II only. c. Both I and II. d. Neither I nor II. CPA-01311 Choice "d" is correct. I is incorrect because while a principal must have capacity, an agent need not have capacity; a minor may serve as an agent. II is incorrect because destruction of the subject matter of the agency constitutes a change in circumstances that will terminate the agency. 2. CPA-01313 When a valid contract is entered into by an agent on the principal's behalf, in a non-disclosed principal situation, which of the following statements concerning the principal's liability is correct? The principal The principal may must ratify be held liable the contract to once disclosed be held liable CPA-01313 Choice "b" is correct. Once disclosed, an undisclosed principal can be held liable on a contract made on the principal's behalf by an agent if the agent had authority. There is no need to ratify; indeed an undisclosed principal can never ratify because a principal can ratify only when a person represents that he is an agent acting with authority on the principal's behalf when in fact the person lacks authority. When a principal is undisclosed, there is no representation of agency and so a prerequisite for ratification is missing.
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